WTO members awaiting new draft text for Seattle

by Chakravarthi Raghavan

Geneva, 17 Oct 99 -- A new revised text of a draft Ministerial Declaration for the Seattle Ministerial meeting of the WTO is expected to be in the hands of WTO members on Monday or Tuesday.

The revised draft text is to be drawn up on the basis of extensive proposals from various delegations for changes to the first draft and its addendum issued by the Chairman of the General Council on his 'personal responsibility'.

The text and various proposed suggestions for changes were discussed in a week-long informal heads of delegation (HOD) meeting.

With the Chairman, Amb. Ali Mchumo of Tanzania not present and chairing the discussions on 14-15 October ( with instead WTO Director-General Mike Moore chairing the meetings), it was not clear who will be preparing the revised text. Trade diplomats were also not clear.

Further work in the General Council on drafting a text is expected later this week, on the basis of a new text, that members hope will adequately reflect the differing perceptions and views, and thus enable negotiations to move forward. "Unless all the proposals and alternatives are in one place, it is difficult to go forward on drafting a text," one trade diplomat commented.

On Friday, the informal HOD discussed the various subjects and items in the Chairman's draft and addendum.

Among the proposals under other elements of the post-Seattle work programme, involving various built-in reviews and mandates, the like-minded group (LMG) of developing countries -- Cuba, Dominican Republic, Egypt, Honduras, India, Indonesia, Malaysia, Pakistan, Uganda and Zimbabwe -- called for completing the harmonization work programme on rules of origin (which was to have been completed by 20 July 1998, but has not been) to be completed no later than 31 July 2000.

In other comments and proposed changes to the text, the LMG countries opposed the inclusion among subjects for negotiations, the catch-all item 'Coherence', and the proposal for a working group, under the authority of the General Council, and with participation by the IMF, World Bank and other international organizations.

But separate working groups have been proposed:  (1) to examine the relationship between the multilateral trading system and the current global financial and monetary systems, (2) on transfer of technology, and (3) on trade and debt.

Meanwhile, in proposals during the informal HOD process (which has become available now), before the Chairman's first draft was put out, India has formulated some detailed proposals for a review of the balance-of-payments provisions, in Art.XVIII:B of the GATT 1994 and the 1994 Understanding (of the UR agreement on this), and another on Art. XVIII: A and C of the GATT 1994 relating to governmental assistance to economic development.

The provisions of Art. XVIII:B and the Understanding, the Indian communication said, recognised the problems of developing countries with low standards of living and in early stages of development, and the tendency of development itself to generate BOP difficulties, and the need to safeguard the external positions of developing countries and ensure a level of reserves adequate for implementation of programmes of economic development.

These provisions were intended to authorize protective or other measures affecting imports, including quantitative restrictions (QRs) for BOP purposes in a manner that took full account of continued high level of demand for imports likely to be generated by programmes of economic development. The criteria set out in Art XVIII:9 were intended to differ from those applied to developed countries under Art.XII:2.

Art. XVIII:9 also recognized special factors that may be affecting the reserves of a Member and the need for reserves, while Art XVIII:11 gave further recognition to the need to pay due regard to the need to restore equilibrium in BOP on a "sound and lasting basis" and to the desirability of assuring an economic employment of productive resources in the carrying out of the domestic policy by the Member concerned. The Art XVIII:11, in its second sentence also provided that the sentence shall not be interpreted to mean that a Member is required to relax or remove restrictions if this would produce conditions justifying the intensification or institution of restrictions. A proviso also provided that no Member shall be required to withdraw or modify restrictions on the ground that a change in its development policy would render unnecessary the restrictions.

But the recent rulings and recommendations of the dispute panel and Appellate Body (in the dispute brought against India by the US on its import restrictions on BOP grounds), "would appear to have the result of making it extremely difficult" for developing countries to take recourse to Art. XVIII:B, "besides vitiating" the differences in the provisions of Articles XII and XVIII:B for developed and developing countries respectively.

[The Appellate Body in its report has said that 'development policy' is different from 'macro-economic policy' and developing countries could thus be asked to change their macro-economic policy to obviate the restrictions, as the IMF had recommended.]

In addition, the Indian communication said, "in view of the changing nature of the external vulnerability of developing countries, in particular to the volatility of capital flows, and the requirements to secure consistency between policies on the current and capital account, the conventional criteria for the legitimacy of measures to safeguard the BOP in the context of WTO provisions for developing countries, including the adequacy of reserves, need to be reviewed." The US Federal Reserve Chair, Alan Greenspan, as well as other economists, have pointed out that the criteria, based on imports (for instance, 3 months import cover) or current account deficits could no longer provide an appropriate basis for assessing reserve adequacy.

The panel and Appellate Body decisions have also raised questions about the relative competencies of the political and judicial organs of the WTO.

The BOP Committee should be requested to examine all the issues and mandated to submit its report to the General Council in a time-bound manner, and its examination should include the jurisdiction of the BOP Committee and the General Council, all aspects relating to the criteria for assessing the adequacy of reserves and justification of import measures and the scope and applicability of the proviso to Art.XVIII:11 and Note Ad Article XVIII:11

The US said it was opposed to any review that would reduce the role of the dispute settlement panels.

In another communication on Art XVIII (Parts A and C), India has said the article recognized that the attainment of objectives of the GATT would be facilitated by the progressive development of economies of developing countries, which can only support low standards of living, and that it may be necessary for such economies to take protective or other measures affecting imports, and that they need additional facilities. Consequently, these provisions lay out special procedures to deal with modifications or withdrawal of concessions included in a member's schedule, and that in those cases where there may be circumstances where no measure consistent with the provisions of the WTO agreement was practicable, "to permit such Member to promote the establishment of a particular industry with a view to raising the general standard of living of its people".

These provisions were intended to recognize that it would be more difficult for Members with limited resources, and depending on primary production, to rely exclusively on measures consistent with the WTO Agreement to solve the problems arising from implementation of their programmes of economic development.

Accordingly, under the Article, any Member coming under the scope of the Article, and proposing to modify or withdraw a concession, is to enter into negotiations with any member with whom such a concession was initially negotiated and others having substantial interest in it. And if no agreement is reached within 60 days, the Member can apply to all WTO members, acting jointly, for approval of the proposed modification or withdrawal of concessions affecting imports.

But while WTO members can act jointly and concur in the matter, the Member concerned may now be required to make additional concessions during the time of deviation from the provisions.

But the ability of developing countries to offer additional concessions or to face temporary suspension of a concession substantially equivalent to the impairment is limited.

It was necessary to enable developing countries to extend government assistance to domestic industry beyond the earliest stages of manufacturing, and to nourish more advanced competitive industry.

But the compensation requirements now were so onerous, and the threat of suspension of concessions so real, that "these provisions have had little or no practical effect in promoting particular industries with a view to raising the general standards of living of people in developing countries."

India cited in this connection the 1999 UNCTAD Trade and Development Report which has called for a re-examination of these provisions, since the compensation requirements "are so onerous as likely to nullify the very intent of the article, which is to allow developing countries to promote new industries."

To enable developing countries to grant tariff protection and take specific measures affecting imports to promote the establishment of a particular industry under Art. XVIII:A and C, India has proposed that for the purposes of paragraphs 7 (b) and 18 (b) of the article, "it shall be sufficient for WTO Members, acting jointly, to concur in the proposed measure if they are satisfied that all reasonable efforts have been made by the concerned Members to reach an agreement with any relevant Members."

The communication does not deal with the problem of how, given the present insistence on consensus decision-making, any developing country could hope to get relief if a developed country (or even a developing country) affected were to block a consensus.(SUNS4532)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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